There is a difference between comparative advantage and competitive advantage. It is important to understand the difference in these terms in order to maximize profit.
A competitive advantage is when a company or individual has an advantage over their competition in delivering their products or services.
Comparative advantage has to do with natural and human resources. Every country has a comparative advantage in at least one industry. A Country that has gold rocks laying on the ground has a comparative advantage over a country that has very little gold thousands of feet deep. This is because of the easy accessibility and abundance of the resource compared to other countries.
A comparative advantage compares the feasibility of producing a product or delivering a service between countries, companies and individuals.
Many advanced countries do not produce products because their labor force can produce more income by buying products from other countries and using their labor for other purposes. Even though the advanced country might have a competitive advantage over another in producing a product, it might not be worth it to do so. This leaves a comparative advantage to another country.
People also have comparative advantages. A lawyer who earns $400 per hour might be an exceptional landscaper. He might be the best landscaper in his state. That doesn’t mean he should do the landscaping in his own yard. He can simply pay someone to do his landscaping for $50 per hour while he focuses his efforts in his law practice. Even though the lawyer has a competitive advantage in landscaping he does not have a comparative advantage. It would be a disadvantage to perform landscaping.
Markets and governments have there head in the sand when it comes to the financial state of the world economy. Many people with an entitlement attitude are protesting and demanding benefits and entitlements. They are demanding that those with more give up some to those with less. They don’t realize they are demanding labor that they are unwilling to perform. For those of you who know me, you know that I define money as labor. Currencies must represent labor performed or it is just smoke and mirrors. Entitlement activist are demanding paper money but don’t have a clue to the fact that if that piece of paper doesn’t represent something produced, it has no value.
The fact is, more and more people want more than the equivalent of what they produce. Just apply a little common sense to what that means for the future if more is given than what is earned.
THERE’S A BIG TRAIN WRECK COMING!